English for Business and Finance

SZAKMAI IDEGENNYELVI KOMMUNIKÁCIÓ (PÉNZÜGY) ANGOL NYELVEN

”Nyelvtudás” Idegen nyelvi képzési rendszer fejlesztése a Nyíregyházi Főiskolán 2013-2014” című TÁMOP -4.1.2.D-12/1/KONV-2012-0019 sz. projekt

Nyíregyházi Főiskola

Összeállította, a feladatokat és a szószedetet írta:

Dr. Tukacs Tamás

Nyíregyháza

2013.

Contents

Foreword................................................................................................................................................3

I. The Basics of Economics, Some Fundamental Concepts.....................................................................4

II. Supply and Demand (1)....................................................................................................................11

III. Supply and Demand (2)...................................................................................................................18

IV. Inflation...........................................................................................................................................30

V. Taxation (1): Consumption Taxes.....................................................................................................39

VI. Taxation (2): Individual Taxes..........................................................................................................46

VII. International Trade, Import and Export (1)....................................................................................53

VIII. International Trade, the Balance of Trade (2)...............................................................................61

IX. Measuring the Output of Economy: GDP, Budget Deficit and Public Debt......................................69

X. Test Yourself.....................................................................................................................................78

GLOSSARY.............................................................................................................................................87

Foreword

The present compilation of business-oriented texts and exercises aims to introduce students into the basics of business and finance in English. The level of readings and tasks has been designed for students at B2 level. The backbone of the material is provided by the “Economics” section of the free internet course material taken from www.boundless.com. All sources have properly been indicated.

Each chapter is designed in a similar way. Before the readings, some key words are highlighted that are necessary to know to understand the reading itself. The LANGUAGE EXERCISES after the texts have a twofold aim: they wish to broaden the student’s grammar and vocabulary and consolidate the key concepts of the readings. The exercises are made up of “true or false” exercises, matching tasks, gap-filling exercises and tasks which build vocabulary through presenting nouns, verbs and adjectives coming from the same stem. Finding synonyms help students to enlarge their word stock and make them think about the delicate shades of meaning that make a word differ from its synonym. The most traditional type of exercise is perhaps the translation section. Every chapter contains a GRAMMAR POINT where students are exposed to a point of grammar appearing in the readings.

Apart from “traditional” grammar and vocabulary exercises, the tasks also include a THINK ABOUT IT section, which aims to provoke the student in connection with some aspect of the reading. At the end of the sections, online VIDEO materials explain and/or elaborate on some topics of the readings. The transcripts of video materials are to be distributed in class. Each chapter concludes with a REVISION part. The last chapter is a “Test your knowledge” section, the key of which will be provided by the class instructor. The material ends with a bilingual Glossary.

LEGENDS

Make sure you know these words before reading the text

LANGUAGE EXERCISE

HOMEWORK

GRAMMAR POINT

VIDEO

REVISION

I. The Basics of Economics, Some Fundamental Concepts

Make sure you know these words before reading the text

to allocate, limited resources, scarcity, demand, supply, trade-off, labour, capital, entrepreneur, distribution, value, voluntary

Economics is the study of how society allocates scarce resources to the production of the goods and services it desires.

Key Points

Economics evaluates how individuals, households, businesses, and society allocate, use and obtain limited resources.

Economists study how decisions are made: work habits, spending habits, savings and investment habits. Economists also focus on external forces or other trends that influence the way people, households and society make decisions.

Since resources are limited, individuals, households and societies cannot always obtain everything they want. Scarcity governs the choices of how to best use these resources; do they pick A, B, or C? An allocation method is necessary.

Example

Robinson Crusoe is stranded on a desert island.  He can spend his time fishing or searching for coconuts.  He knows that every hour he spends fishing will produce two fish, and every hour he spends finding coconuts will produce three coconuts. Economics deals with the way he allocates finite resources--in this case, his time--to best fulfil his needs, which are coconuts and fish.

A

Scarcity is the fundamental economic problem of unlimited human demand for goods and services in a world of limited resources. This means that society has insufficient productive resources to fulfil all of society's wants and needs. Scarcity is the reason that not all of society's goals can be pursued simultaneously. The resources used to produce one good cannot be used to produce a second good at the same time. Therefore, any decision to produce more of one good requires making fewer alternative products. This trade-off means that some goods and services for which there is a demand will not be produced, as society values using its resources for other purposes more highly. Every society, therefore, is confronted with decisions about which goods and services to produce and which to forego. Of those goods it produces, society must decide how much to make of each. Finally, the goods and services that people want must be made by workers (labour), machines (capital), and raw materials (land), in addition to the talents of entrepreneurs. Since these resources are limited, society must decide how to allocate them.

B

Economics is the study of how society allocates these scarce resources to the production of the goods and services it desires. Ideally, the resources are allocated to their highest valued uses. Singers will be best suited to produce songs, not car repairs, while society would benefit more from mechanics that repair cars instead of making music. In addition, productive economies will find ways to improve available resources (such as educating workers), as doing so will result in an increased capacity to produce the goods and services society wants. Finally, imaginative businesses will find ways to use and combine various kinds of resources in order to maximize production.

So, the study of economics principally explores the following fundamental questions:

What goods and services should society produce? Producers decide what to produce based on demand.

For whom should the goods be produced? This depends on the consumers’ ability and willingness to pay for the goods or services. 

How should society produce these goods and services? Producers determine the most profitable way to produce the goods/services. 

When should the goods be produced?

C

Historically, these questions have been answered differently by different societies. In some cases, cultural traditions guide individual behaviour. For example, the caste system in India was used to control how goods and services were produced there for a long time, as Indians were restricted to specific occupations based on their caste. A second approach to organizing production and distribution is the use of a central authority, usually the government. In this type of system, often referred to as a command economy, government bureaucrats determine the answers to the fundamental questions, issuing production quotas for suppliers and regulations about production methods. Communist China before 1978 was organized this way. Finally, voluntary interaction among the members of society is another alternative. In this type of system, usually referred to as capitalism, the key questions are answered by individuals making choices freely, relatively unbound by the forces of tradition and government. The reforms instituted after 1978 and the freeing of the Chinese economy from government control in recent decades has moved China in the direction of capitalism and away from a system of command and control. In most cases, societies rely on a mix of tradition, command, and voluntary interaction. These systems are called mixed economies.

(Source: https://www.boundless.com/economics/welcome-to-economics/fundamentals-of-economics/introduction-to-economics/)

THINK ABOUT IT

1. Do we live in the world of scarcity, or rather, bounty?

2. How do you think the decisions about allocating resources should be made in a society?

3. What kind of investments should enjoy priority in a society (or in the world)?

4. What is more important? Production or services? Again, what is more important? Working or studying?

5. Which is better? Centralised command economy or capitalism based on free enterprise?

LANGUAGE EXERCISE

I. True or false?

1. Scarcity means that people can produce more of any kind of goods in several fields at the same time.

2. Every society has to give up the enjoyment of certain goods or services because of limited resources.

3. Whether goods can be sold is determined only by how much factories can produce of it.

4. China today has a controlled, state-regulated, bureaucratic command economy.

5. Economies where control and initiative are both present are called mixed economies.

II. Match the words and the definitions

1. capital, 2. demand, 3. economics, 4. goods, 5. labour, 6. quotas, 7. scarcity, 8. trade

a., That which is produced, then traded, bought, or sold, and finally consumed.

b., An inadequate amount of something; a shortage

c., Buying and selling of goods and services on a market.

d., In economics, these are limits placed on the quantity of goods entering a country (import) or leaving a country (export).

e., Wealth in the form of money or property, used or accumulated in a business by a person, partnership, or corporation.

f., The amount of a good or service that consumers are willing to buy at a particular price.

g., The study of resource allocation, distribution and consumption; of capital and investment; and of management of the factors of production.

h., Workers collectively; the workforce; the working class.

III. Fill in the gaps with the above words

1. Bilateral ………………………… means the exchange of goods and services between two countries.

2. Left-wing people supporting social solidarity usually vote for ……………………… parties.

3. The main task of an entrepreneur is to find out whether there is enough ………………………… for a particular type of goods.

4. The two main types of exchange that can take place on the market is selling ………………………….. and services.

5. To protect its labour force, the USA introduced strict annual immigration ……………………. for foreigners.

6. To start a business, it is advisable to have a sufficient amount of ……………………………..

7. University students who would like to become experts at finance, business management, investment, etc. study ………………………………………………..

8. What motivated John to start a language school was the …………………………………. of such institutions in the area.

IV. Supply the necessary word forms. The Hungarian equivalents are given

NOUN VERB ADJECTIVE

(korlátozás) to limit (korlátozott)

(termelés) to produce (termelékeny)

decision (eldönt) (döntő jelentőségű)

(fejlesztés) to improve (fejlett)

occupation (elfoglal) ([el]foglalt)

(keverék) (összekever) mixed

V. Find synonyms for the following words. You can choose from the list below

to acquire, to advance, basic, to boost, to curb, central, dearth, to develop, crucial, to enhance, to get, elementary, insufficiency, to gain, lack, key, to narrow, to receive, rareness, to restrict, to restrain, to reduce, shortage, to take, want, to upgrade, vital

to obtain:

to limit:

scarcity:

to improve:

fundamental:

VI. Translate the following text

A közgazdaságtan olyan alapvető kérdésekkel foglalkozik, mint a forrásokkal való gazdálkodás, és a kereslet és kínálat viszonya. A gazdaság legfőbb problémája, hogy a szinte határtalan kereslet és a szűkös erőforrások hogyan egyeztethetők össze egy kompromisszumos megoldással. A társadalomnak el kell döntenie, hogyan osztja el a meglévő forrásokat, és ebben milyen irányító szerepet játszik. A két végpont a központosított, utasításokon alapuló gazdaság (ahol egy párt vagy kormány megmondja, miből mennyit kell előállítani) és a szabadkereskedelmen és a szabad vállalkozáson alapuló gazdaság. A kettő természetesen keveredhet egymással.

GRAMMAR POINT

Active vs. Passive Voice

Economics evaluates how individuals, households, businesses, and society allocate, use and obtain limited resources.

Every society is confronted with decisions about which goods and services to produce and which to forego.

Active: Subject doing something + Verb

economics + evaluates

Passive: Subject suffering the action + “to be” + V3 (done, gone, confronted, etc.)

society + is + confronted

HOMEWORK

Collect passive sentences from the text.

Pay attention to the following Hungarian expression: “hogyan egyeztethetők össze”, “hogyan osztja el” (“hogyan vannak elosztva”), “keveredhet egymással” (“keverve lehet”).

VIDEO – On Chinese Economy (09 August 2013, 0:56 min)

(Source: http://www.youtube.com/watch?v=8rJWB45KEYs)

REVISION

1. In your own words, give a definition of economics.

2. Why does “scarcity” come up as a problem in economics?

3. What are the effects of scarcity?

4. How can a society handle this problem?

5. Compare the economies of China and the United States.

II. Supply and Demand (1)

Make sure you know these words before reading the text

supply, supplier, curve, schedule, to induce, to affect, inputs, constant, expectations, to be directly proportional to sg.

Supply is the amount of some product that producers are willing and able to sell at a given price, with all other factors being held constant.

Key Points

The supply curve is a graphical representation of the relationship between prices and quantity supplied. It is generally positively sloped.

The supply schedule represents the same information - the quantity supplied at a given price - in table form.

Many factors affect the amount supplied at a given price. Some examples are the price of inputs, the expectations of suppliers about the future, and existing technology.

Example

A computer manufacturer will only produce 1,000 computers if the price is $100, but will increase production to 20,000 computers if the price of a computer rises to $400.

Supply is the amount of some product that producers are willing and able to sell at a given price. Supply is usually represented as a supply curve showing the relationship of price to the quantity of product that businesses are willing to sell.

Supply Curve

The relationship of price and quantity supplied can be exhibited graphically as the supply curve. The curve is generally positively sloped. The curve depicts the relationship between two variables only: price and quantity supplied. All other factors affecting supply are held constant. However, these factors are part of the supply curve and are present in the intercept or constant term.

A supply schedule is a table which shows how much one or more firms will be willing to supply at particular prices. It assumes that all other factors, such as prices of input goods, are held constant.

Factors Affecting Supply

Innumerable factors could affect a seller's willingness or ability to produce and sell a good. Some of the more common factors are:

Price of goods: The basic supply relationship is between the price of a good and the quantity supplied. Although there is no "law of supply", the relationship is generally positive or direct: an increase in price will induce and increase in the quantity supplied.

Price of related goods: For purposes of supply analysis, related goods refer to goods from which inputs are derived to be used in the production of the primary good. For example, Spam is made from pork shoulders and ham. Both are derived from pigs. Therefore pigs would be considered a related good to Spam. In this case, the relationship would be negative or inverse. If the price of pigs went up, the supply of Spam would decrease (supply curve shifts up or in) because the cost of production would have increased. A related good may also be a good that can be produced with the firm's existing factors of production. For example, a firm produces leather belts. The firm's managers learn that leather pouches for smartphones are more profitable than belts. The firm might reduce its production of belts and begin production of cell phone pouches based on this information. Finally, a change in the price of a joint product will affect supply. For example, beef products and leather are joint products. If a company runs both a beef processing operation and a tannery, an increase in the price of steaks would mean that more cattle are processed which would increase the supply of leather.

Conditions of production: The most significant factor here is the state of technology. If there is a technological advancement in the production of a good, the supply increases. Other variables may also affect production conditions. For instance, for agricultural goods, weather is crucial for it may affect the production outputs.

Expectations: The expectations of sellers concerning future market conditions can directly affect supply. If the seller believes that the demand for his product will sharply increase in the foreseeable future, the firm may immediately increase production in anticipation of future price increases.

Price of inputs: Inputs include land, labour, energy, and raw materials. If the price of inputs increases, the supply curve will shift in as sellers are less willing or able to sell goods at existing prices. For example, if the price of electricity increased, a seller may reduce his supply because of the increased costs of production. The seller is likely to raise the price that the seller charges for each unit of output.

Number of suppliers: The market supply curve is the horizontal summation of the individual supply curves. As more firms enter the industry, the market supply curve will shift out and drive down prices.

Government policies and regulations: Government intervention can have a significant effect on supply. Government intervention can take many forms including environmental and health regulations, hour and wage laws, taxes, electrical and natural gas rates, and zoning and land use regulations.

This list is not exhaustive. All facts and circumstances that are relevant to a seller's willingness or ability to produce and sell goods can affect supply. For example, if the forecast is for snow, retail sellers will respond by increasing their stocks of snow sleds, skis, winter clothing, or bread and milk.

(Source: https://www.boundless.com/economics/principles-of-supply-demand/introduction-to-supply-demand/what-is-supply/)

THINK ABOUT IT

1. Does the supply curve or supply chart always show a direct relationship between the quantity and the price? (Think, for instance, of house prices now in Hungary.)

2. Can the supply curve be positively slanted infinitely? Might there be a point where the curve flattens?

3. Taking a very simple example, which factors do you think affects the supply of bread?

4. In what ways can government intervention affect supply? (E.g., if the government reduces the price of electricity.)

5. In a global perspective, the supply of which natural resources do you think are sustainable and which are unsustainable?

LANGUAGE EXERCISE

I. True or false?

1. Supply is directly proportional to price.

2. The supply curve is always positively slanted, even if the price of input goods are not constant.

3. The rise of the price of a certain good curbs the supply of that product.

4. If the price of inputs rises, then supply will be reduced.

5. In capitalism, governments cannot affect supply.

II. Match the words and the definitions

1., demand 2., goods 3. input 4., intervention 5., labour 6., market 7., output 8., supply

a., One of many varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange.

b., Production; quantity produced, created, or completed.

c., Something fed into a process with the intention of it shaping or affecting the outputs of that process.

d., That which is produced, then traded, bought, or sold, and finally consumed.

e., The action of interfering in some course of events.

f., The amount of a good or service that consumers are willing to buy at a particular price.

g., The amount of some product that producers are willing and able to sell at a given price, all other factors being held constant.

h., Workers collectively; the workforce; the working class.

III. Fill in the gaps with the above words

…………………………….. prices are shaped by the interaction of supply and demand.

A good company produces …………………….. for which there is sufficient demand.

Due to the drought in the southern part of the country, the …………………………. of watermelon dramatically fell.

If the price of …………………….. or raw materials (also called ………………….) increases, that affects the ……………………………. as well.

In the summer there is an increased ………………………….. for sunglasses and ice cream.

The value of the national currency dropped so drastically that immediate government …………………………………….. was needed.

IV. Supply the necessary word forms. The Hungarian equivalents are given

NOUN VERB ADJECTIVE

supply (ellát, termel) (megtermelt)

product / produce* (termel) (megtermelt)

(kapcsolat) to relate (kapcsolódó)

(hatás) to affect (érintett)

(növekedés) to increase (megnövelt)

intervention (beavatkozik) ----

(kimerítés) (kimerít) exhaustive

* produce (n.): termény, termés

V. Find synonyms for the following words. You can choose from the list below

to augment, to butt in, to change, to come up with, to create, to deliver, to enlarge, to expand, to generate, to influence, to intercede, to have an effect on, to intensify, to interfere, to meddle, to modify, to manufacture, to multiply, to produce, to satisfy, to step in, to raise, to yield (2x)

to produce:

to intervene:

to increase:

to supply:

to affect:

VI. Translate the following text

A kínálat és a kereslet egyensúlya határozza meg a piaci árakat. Általában a kínálat és a termék ára egyenes arányban áll egymással, ami egy kínálati táblázatban vagy kínálati görbén ábrázolható. A kínálat és az ár akkor van egyensúlyban, ha a ráfordítás nem befolyásolja jelentősen az árat. A kínálatra számos tényező lehet hatással, mint például a ráfordítás, az időjárás, más piaci szereplők, az eladó elvárásai vagy a többi piaci szereplő. A kormányzat beavatkozása is jelentősen hat a kínálatra, vagy pozitív vagy negatív irányban.

GRAMMAR POINT

1. The conditional

First type:

If the price is $100, a computer manufacturer will only produce 1,000 computers.

IF + simple present // WILL + verb1

Second type:

If the price of pigs went up, the supply of Spam would decrease.

IF + simple past // WOULD + verb1

Third type:

If the supplier had known that prices would go up, he would have produced more.

IF + past perfect // WOULD HAVE + verb3

HOMEWORK

Write three sentences for each type relying on the text.

VIDEO – Excess Supply Damping UK House Prices (23 March 2012) (3:09 min)

(Source: http://www.youtube.com/watch?v=Q53e5XalBaU)

REVISION

1. What is supply?

2. What is the relationship between supply and price?

3. How can supply be exhibited graphically?

4. How do the conditions of production affect supply?

5. What about inputs? Government intervention?

III. Supply and Demand (2)

Make sure you know these words before reading the text

demand, inverse, disposable, complement, substitute, preference, to encourage, equilibrium

What is Demand?

Demand is the desire to own anything, the ability to pay for it, and the willingness to pay during a specific period.

Key Points

Demand can be represented graphically, as a line with price on the y axis and quantity demanded on the x axis. This is the demand curve.

It can also be represented in a table, known as a demand schedule. Price and demand almost always have an inverse relationship. As the price of a good

goes up, the demand goes down. There are many factors other than price that influence demand. Some examples are

tastes and preferences, disposable income, and the price of related goods.

Demand

In economics, demand refers to how much of a product or service is desired by buyers. The quantity demanded is the amount of a product people are willing to buy at a certain price. The relationship between price and quantity demanded is known as the demand relationship.

Economists record demand on a demand schedule and plot it on a graph as a demand curve that is usually downward sloping. The downward slope reflects the relationship between price and quantity demanded: as price decreases, quantity demanded increases. In principle, each consumer has a demand curve for any product that he or she would consider buying. The consumer's demand curve is equal to the marginal utility (benefit) curve. When the demand curves of all consumers are added up, the result is the market demand curve for that product.

If there are no externalities, the market demand curve is also equal to the social utility (benefit) curve.

Marginal Utility

“Marginal” in this expression means slight, seemingly unimportant, “marginal” change, starting at some baseline level, which might lead to greater changes. Utility means gain, something being beneficial for the individual. The theory of marginal utility (MU) deals mainly with consumption habits. It claims that for some time, the gain or satisfaction of the consumer is directly proportional to the quantity of goods consumed, but after a time, reaching zero marginal utility and the maximum of total utility, it starts to decline. This is called the law of diminishing marginal utility.

Let us take a very simple example. There is a cake in front of you. You start eating it. After the first slice, you feel great and your level of satisfaction is high. After the second slice, you might still be satisfied and feel the same. This might go on until the third (fourth, fifth…) slice, when there comes a point when you feel “full.” This is the point of zero marginal utility (you cannot feel any better) and maximum total utility. If you ate, let us say, the last slice of cake, it would be bad for you and you would not gain anything with it. This is the point where MU begins to diminish.

Factors Affecting Demand

Innumerable factors and circumstances could affect a buyer's willingness or ability to buy a good. Some of the more common factors are:

Good's own price: The basic demand relationship is between potential prices of a good and the quantities that would be purchased at those prices. Generally, the relationship is negative, meaning that an increase in price will induce a decrease in the quantity demanded. This negative relationship is embodied in the downward slope of the consumer demand curve. The assumption of a negative relationship is reasonable and intuitive. If the price of a new novel is high, a person might decide to borrow the book from the public library rather than buy it. Or if the price of a new piece of equipment is high a firm may decide to repair existing equipment rather than replacing it.

Price of related goods: Related good can be complements or substitutes. A complement is a good that is used with the primary good. Examples include hotdogs and mustard, beer and pretzels, automobiles and gasoline. The price of the complement and demand for the original good have an inverse relationship, so if the price of the complement goes up, the quantity demanded of the other good goes down. (If the price of fuel goes up, fewer people are likely to buy new cars.) The other main category of related goods is substitutes. Substitutes are goods that can be used in place of the primary good - for example, hotdogs and hamburgers. The price of the substitute and the demand for the good in question have a direct relationship. If the price of the substitute goes down the demand for the good in question goes down. (If the price of one brand of cellphone diminishes, the other cellphone prices will also drop.)

Personal Disposable Income: In most cases, the more disposable income (income after tax and receipt of benefits) you have the more likely you are to buy.

Tastes or preferences: The greater the desire to own a good the more likely you are to buy the good. There is a basic distinction between desire and demand. Desire is a measure of the willingness to buy a good based on its intrinsic qualities. Demand is the willingness and ability to put one's desires into effect. It is assumed that tastes and preferences are relatively constant.

Consumer expectations about future prices and income: If a consumer believes that the price of the good will be higher in the future he is more likely to purchase the good now. If the consumer expects that his income will be higher in the future the consumer may buy the good now. In other words positive expectations about future income may encourage present consumption.

Population: If the population grows this means that demand will also increase for a good. If the good is a basic commodity it will lead to a higher demand.

This list is not exhaustive. All facts and circumstances that a buyer finds relevant to his willingness or ability to buy goods can affect demand. For example, a person caught in an unexpected storm is more likely to buy an umbrella than if the weather were bright and sunny.

What affects Supply and Demand?

In a competitive market, at the optimum equilibrium price, the quantity demanded by consumers will equal the quantity supplied by producers.

fig. 1

Supply and Demand

The price P of a product is determined by a balance between production at each price (supply S) and the desires of those with purchasing power at each price (demand D). The diagram shows a positive shift in demand from D1 to D2, resulting in an increase in price (P) and quantity sold (Q) of the product.

(Source: https://www.boundless.com/economics/principles-of-supply-demand/introduction-to-supply-demand/what-is-demand/)

Example

When people go to the market to buy fruit, their decision how much to buy of which fruit will depend, among other factors, on the price of each kind of fruit. If apples are cheap, people will buy them in large quantities, if they are expensive, people will buy fewer of them. If we

look at the price of apples and record the quantities sold at the given price, we will get a diagram like this.

1 2 3 4 50

20

40

60

80

100

120

Supply and demand

Suppy curveDemand curveMarket price

Price

per

kilo

Which means that when apples were sold at Ft 80 a kilo, people only bought a tonne of them. And, as prices declined, people bought more and more apples. At the price of Ft 20, the quantity demanded rose to 4 tonnes. This inverse relationship between price and quantity is shown in a typical demand curve.

If we look at the market from a suppliers’ point of view, we will realise that they will be willing to place more goods on the market when prices are high, and less when they are low. At a price of Ft20 a kilo, producers are willing to sell only one tonne, but at Ft80, four tonnes will be available. If we now draw this second line, the supply curve, in the demand diagram, we can see that the two curves meet where about 2.5 tonnes are sold at around Ft50 a kilo. This will be the market price and this is roughly how a free market works. The diagram is often referred to as the Marshallian Cross (after Alfred Marshall, a famous economist [1842-1924]).

(Source: Radványi-Görgényi: English for Business and Finance. Haladó üzleti és pénzügyi nyelvkönyv. Budapest: Akadémiai, 2008, p. 28.)

HOMEWORK

A Mini Case. You have a stand at the market and you have been selling raspberries at Ft100 a kilo. They cost you Ft40 per kilo. The market is still open for an hour and a half but it has started raining. You have 80 kilos on hand, and by tomorrow, the raspberries will be unsalable. With customers scarce, you estimate that your demand for raspberries will be like this:

Price: 60 50 40 30 20

Quantity: 30 40 50 70 80

What price would you charge to maximise profits? Explain your decision.

(Source: Radványi-Görgényi: English for Business and Finance. Haladó üzleti és pénzügyi nyelvkönyv. Budapest: Akadémiai, 2008, p. 28.)

Use the following terms: to multiply, to deduce, “x” multiplied by “y” equals “z”; “x” deducted from “y” equals “z”.

THINK ABOUT IT

1. Can you mention other complements and substitutes that affect demand? (Like car – fuel; hotdog – hamburger).

2. Let us return to the example in marginal utility, the cake. Draw a graph, representing on axis “x” the quantity of consumed cake, and total utility on axis “y”. Draw another graph, but this time representing on axis “y” marginal utility. When is marginal utility zero?

3. Can you give other examples for marginal utility? Imagine yourself shopping. What do you buy and what do you decide not to buy? Why?

4. Can you apply this theory in more abstract ways? (E.g., factories, businesses, markets, employments, etc.)

5. Marginal utility refers to rational buyers. Are we always rational consumers?

LANGUAGE EXERCISE

I. True or false?

1. The demand curve is usually positively sloped.

2. The market demand curve is the sum of the individual buyers’ demand curve.

3. The ratio of marginal utility and the quantity of the consumed product is always the same.

4. Total utility is directly proportional to marginal utility.

5. The prices of both the complement and the substitute are directly proportional to the price of the good in question.

II. Match the words and the definitions

1. assumption, 2. commodity, 3. complement, 4. consumer, 5. demand, 6. intrinsic, 7. marginal, 8. substitute, 9. utility

a., An individual who trades money for goods.

b., Anything movable (a good) that is bought and sold.

c., Innate, inherent, inseparable from the thing itself, essential.

e., Of, relating to, or located at or near a margin or edge; also figurative usages of location and margin (edge).

f., One that takes the place of another; a replacement.

g., Something that completes, makes up a whole, or brings to perfection.

h., The ability of a commodity to satisfy needs or wants; the satisfaction experienced by the consumer of that commodity; usefulness.

i., The act of taking for granted, or supposing a thing without proof; a supposition; an unwarrantable claim.

j., The amount of a good or service that consumers are willing to buy at a particular price.

III. Fill in the gaps with the above words

An ideal …………………………………. never buys more than he or she needs.

Green political parties used to be ……………………………. fifty years ago but they are becoming more and more significant.

In the summer, the ……………………………. for gloves and boots is relatively small.

Many people have always doubted the …………………………………. of conferences on world peace.

Successful language learning is only possible when vocabulary ………………………….. learning grammar rules.

Sugar, milk, bread or meat are basic ………………………………………

The ………………………………. is that if the buyer feels the price of a good will go up, he or she will not buy that item.

Those who start learning Chinese are driven by a strong …………………………… motivation to get to know that culture.

When you cannot buy pork, beef might be a good ……………………………………..

IV. Supply the necessary word forms. The Hungarian equivalents are given

NOUN VERB ADJECTIVE

(várakozás) to expect (várt, remélt)

assumption (feltételez) (feltételezett)

complement (kiegészít) (kiegészítő)

consumer (fogyaszt) (fogyasztó)

(határ, periféria) (jelentéktelenné tesz) marginal

(helyettesítés) to substitute (sg. for sg.) (helyettesíthető)

utility (használ) (hasznos)

(kedvezmény / előny(ben

részesítés)

to prefer (kedvező, kedvezményes,

előnyt biztosító)

V. Match the antonyms (words meaning the opposite) and use them in the sentences

consumer supply

assumption crucial

demand extrinsic

marginal seller

intrinsic uselessness

utility certainty

Ami a vevőnek jó, az nem feltétlenül kielégítő az eladónak.

Egy ház lényegi, valódi értéke alapvetően különbözhet a szubjektív, külső értékétől.

Ez egy központi jelentőségű probléma, amelyet egyes jelentéktelen politikai erők megpróbálnak a maguk javára felhasználni.

A kereslet és a kínálat egyensúlya sohasem állandó.

Ez nem feltételezés, ez tényeken alapuló bizonyosság.

VI. Translate the following text

Az áru mennyisége és az ára a kereslet szempontjából fordított arányban állnak. Ez azt jelenti, hogy minél több áru van a piacon, az annál kevesebbet ér. Lehet, hogy az áru valódi értéke magasabb, de ha túlkínálat jelentkezik, akkor az eladó csak veszteséggel tudja eladni az árucikket. Természetesen a kereslet sem növekedhet a végtelenségig. Egy idő után a vevő nem tud hasznot hajtani abból, hogy egy újabb egységet vesz. Ez a határhaszon elmélete. A teljes haszon az első egység elfogyasztása után a maximális, de ha a határhaszon eléri a csúcsot, akkor a teljes haszon nullára csökken. Számos tényező befolyásolja még a keresletet, például a kapcsolódó árucikkek ára, a vevő várakozásai, a rendelkezésre álló jövedelme vagy az ízlése.

GRAMMAR POINT

I. Similar words

to affect – effect

influence – affluence

complement – compliment

capital – capitol

economic – economical

principle – principal

to expect – to accept

II. Stress in nouns and in verbs

In words that are written the same, usually the noun is stressed on the first syllable, and the verb on the second. Sometimes the pronunciation also changes.

‘Increase – to in’Crease

‘Decrease – to de’Crease

‘Import – to im’Port

‘Export – to ex’Port

‘Conflict – to con’Flict, con’Flicting

‘Rebel – to re’Bel

‘Present – to pre’Sent

‘Record – to re’Cord

‘Refuse – to re’Fuse

‘Subject – to sub’Ject

HOMEWORK

I. Fill in the gaps.

……………………………… development depends largely on people willingness to consume.

A key ………………………………. of economics is that the more goods there are on the market, the lower their price is.

A motivating teacher must have a good …………………………………. on students.

An ………………………………….. way of using paper is if you print on its both sides.

In the early 1950s the number of television sets in the UK began to expand along with rising……………………………………….

Processing factories ………………………………… the work in the fields.

The ………………………………… of Japan is Tokyo.

The …………………………………. called Johnny into his office and told him off.

The …………………………………. of the global crisis are immeasurable.

The ………………………………….. is the meeting place of the US congress.

The global crisis has ……………………………… Hungary as well.

The producers ………………………….. people to buy more and more products.

You have to ………………………………. the fact that you cannot shut out advertisements from your life.

II. Practise the pronunciation of these pairs.

The increase in prices is called inflation.

The price of electricity has been increased.

The decrease of prices is commonly called deflation.

The government has just decreased the price of central heating.

The difference between a country’s import and export give the balance of trade.

Hungary imports, among others, banana, and exports wheat and corn.

Ethnic conflicts break out from time to time in various parts of the world.

These conflicting views are hard to match.

Teenagers are generally rebels who rebel against their parents.

Sue gave me a very nice present for Christmas – another pair of warm gloves.

May I ask Mr Williams to present his views on the financial reforms?

The year 1997 was marked by a record crop in Argentina.

Everything what you say will be recorded in the minutes.

He refused to talk to me about the problems in the office.

Refuse collectors are on strike again in Naples.

A British subject has to subject himself or herself to British laws.

VIDEO – “Rising Demand” for Child Bulletproof Backpacks in US (21 Dec 2012) (0:57 min)

(Source: http://www.youtube.com/watch?v=bfbUIOxmubI)

REVISION

1. What is demand?

2. What is the relationship between demand and the quantity of products?

3. What is marginal utility?

4. What is the relationship between total utility and marginal utility?

5. How does the price of related goods affect demand?

6. What is the difference between complements and substitutes?

7. What does the so-called Marshallian Cross describe?

IV. Inflation

Make sure you know these words before reading the text

inflation, deflation, stagflation, velocity, money supply, investment, liquidity, trap, purchasing power, medium of exchange, unit of account, cash, fixed rate bond, monetary policy

Inflation is a rise in the general level of prices of goods and services in an economy over a period of time.

Example

A product that cost only 5¢ in 1886 would be priced about $1.30 in 2012. This is due to a general increase in prices and not limited to the soft drink industry.

Key Points

The United States has never experienced extreme inflation, but periods of high inflation have posed threats to growth at various points in history.

Inflation can be caused by an increase in the velocity of money (that is, money being spent more quickly) or an increase in the overall money supply.

Economists generally favour low and steady inflation because it encourages investment and prevents liquidity traps.

A liquidity trap is a situation in which the central bank lowers the interest rate close to zero but this fails to stimulate the economy because investors prefer to keep money in cash rather than investing it, because they might even lose money due to the very low interest rates.

Examples

Examples of inflation can be seen at the supermarket. If the inflation rate is 3% annually, for example, then a $3.00 loaf of bread will cost $3.09 in a year. If a family's income has not risen by the same amount, they will not be able to buy as much as they could previously.

Inflation is a rise in the general level of prices of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money, which is a loss of real value in the internal medium of exchange and unit of account in the economy. Unless an individual's income grows at the same rate as inflation, a person's income will buy less after inflation than before. In addition, people who hold cash or fixed rate bonds will see the value of those eroded, a concept known as the inflation tax.

Inflation's effects on an economy are various and can be simultaneously positive and negative. The negative effects of inflation include a decrease in the real value of money and other monetary items over time, uncertainty over future inflation (discouraging investment and

savings), and shortages of goods if consumers begin hoarding out of concern about future price increases. Positive effects include ensuring that central banks can adjust nominal interest rates (intended to mitigate recessions) and encouraging investment in non-monetary capital projects.

Economists generally agree that high rates of inflation and hyperinflation are caused by an excessive growth of the money supply. Views on which factors determine low to moderate rates of inflation are more varied. Low or moderate inflation may be attributed to fluctuations in real demand for goods and services or changes in available supplies, as well as growth in the money supply. However, the consensus view is that a long and sustained period of inflation is caused by the money supply growing faster than the rate of economic growth. Most mainstream economists favour a low and steady rate of inflation. The task of keeping the rate of inflation low and stable is usually given to monetary authorities (central banks).

(Source: https://www.boundless.com/economics/welcome-to-economics/the-economy-as-a-whole/inflation/)

HOMEWORK

1. Look up the history of the Hungarian hyperinflation of 1946. How many pengos were worth one forint?

2. What other cases of hyperinflation do you know? When and where did they occur and what were their consequences?

HOMEWORK

1. Choose two products that you regularly buy and try to find out how much their price has gone up in the past 5 years.

2. Find data for the average rate of inflation and wage increase in Hungary in the past 5 years. How much has real wage increase been?

Unemployment and Inflation - A Short-run Trade-off

In the short-run, policymakers face a trade-off between two undesirable alternatives: inflation and unemployment.

Key Points

Policy interventions, such as monetary injections to increase the quantity of money have several short-term effects on the economy. Specifically, they can decrease unemployment, but increase inflation.

Historically, unemployment and inflation have had an inverse relationship which is modelled by the Philips Curve.

Policy-makers must face a trade-off when deciding whether to pursue policies to address inflation and unemployment.

The Philips Curve

Examples

The Lawson Boom which occurred in the UK in the late 1980s exemplified the short-run trade-off between employment and inflation. During this time, tax cuts, increasing house prices which, along with lower interest rates and high consumer confidence, caused the UK to experience rapid economic growth. By the end of 1989, unemployment had been halved (from more than 3,000,000). With it, however, came a rise in inflation.

Unemployment and Inflation - A Short-Run Trade-off

Most economists believe that, in the short-run, policymakers face a trade-off between two undesirable alternatives: inflation and unemployment. The Phillips Curve shows that historically, there has been an inverse relationship between unemployment and inflation; whenever unemployment has been low, inflation has been high, and vice versa. Further, most policies used to lower unemployment, like those used during recessions, risk increasing the level of inflation. On the other hand, policies to lower inflation will likely increase the unemployment rate. One example is adjusting the national interest rate. Lowering the interest rate encourages businesses to expand, hiring more employees, but also can also lead to a higher money supply and therefore inflation.

Although this relationship is different in the long-run, it is often the short-run about which policymakers are most concerned. Even some economists, such as John Maynard Keynes, argue that short-run variables matter more than long-run ones, as in the long-run "we are all dead." In addition, fluctuations that are caused by supply factors as opposed to demand factors

do not always produce the inverse relationship exhibited by the Philips Curve. In the 1970s, for example, shocks in the price of oil led to both high inflation and high unemployment, a scenario called stagflation. In this case, inflation and unemployment have a direct relationship, as opposed to an inverse one. Stagflation is particularly difficult to remedy for policymakers.

(Source: https://www.boundless.com/economics/welcome-to-economics/the-economy-as-a-whole/unemployment-and-inflation-a-short-run-tradeoff/)

THINK ABOUT IT

1. Increased velocity of money or increased money supply can cause inflation. What other causes of inflation can you think of?

2. What can be the effects of inflation?

3. If money supply exceeds the goods that can be purchased, the result will be inflation. Why?

4. Unemployment and inflation are inversely proportioned (in the short run). Why?

5. Statistics are often misleading. If they show that average rate of inflation is, say, 5%, what does that mean?

6. According to KSH, in the second quarter of 2013, the unemployment rate was 10.3% and the inflation rate in July 2013 was 1.8%. What do you attribute these figures to?

LANGUAGE EXERCISE

I. True or false?

1. An increase in money supply prevents inflation.

2. In the case of a liquidity trap, the interest rate is very low.

3. If the growth of an individual’s income is higher than the inflation, the purchasing power of his or her money is also higher.

4. According to most economists, every form of inflation is dangerous.

5. If the inflation grows, unemployment also grows in most cases.

II. Match the words and the definitions

1. capital, 2. currency, 3. hyperinflation, 4. inflation, 5. interest, 6. liquidity, 7. medium of exchange, 8. monetary, 9. money supply, 10. purchasing power.

a., A very high rate of inflation

b., An increase in the general level of prices or in the cost of living.

c., An intermediary used in trade to avoid the inconveniences of a pure barter system, such as money.

d., Availability of cash over short term: ability to service short-term debt or readily available access to cash

e., Money or other items used to facilitate transactions.

f., Of, pertaining to, or consisting of money.

g., The amount of goods and services that can be bought with a unit of currency or by consumers.

h., The price paid for obtaining, or price received for providing, money or goods in a credit transaction, calculated as a fraction of the amount or value of what was borrowed.

i., The total amount of money (bills, coins, loans, credit, and other liquid instruments) in a particular economy.

j., Wealth in the form of money or property, used or accumulated in a business by a person, partnership, or corporation; material wealth used or available for use in the production of more wealth.

III. Fill in the gaps with the above words

An extremely serious …………………………………… struck Hungary in 1946.

If there is more money in circulation than the value of goods – that is, if …………………………….. exceeds productivity – the result will be inflation.

If you put $1,000 in the bank on an …………………………….. rate of 5%, you will get $1,050 back (before tax) after a period of one year.

IMF stands for International ………………………………………Fund.

One of the best long-term investments is an investment in the human …………………………………..

The first ………………………………………… in human history were shell, precious stones, ivory and other rare and valuable objects.

The low rate of investments due to a very low level of interest rate is called ………………………………… trap: there is no money in economy.

The official ………………………………….. of the United States is the dollar.

When you get a pay rise, you also have to keep in mind the current level of ………………………………………… because it might exceed the rise in your pay.

IV. Supply the necessary word forms. The Hungarian equivalents are given

NOUN VERB ADJECTIVE

(költség) to cost (költséges)

(bátorítás) to encourage (bátorító, biztató)

(jóindulat, pártfogás) to favour kedvező

(név) (elnevez) nominal

attribute (tulajdonít) (tulajdonítható)

(hozzáigazítás) to adjust (igazítható, állítható)

authority (felhatalmaz) (felhatalmazott)

V. Match the antonyms (words meaning the opposite) and use them in the sentences

inflation real value

increase slow

nominal value decrease

short-term deflation

rapid long-term

VI. Match the synonyms and use them in the sentences

to adjust A genuine, positive, true

wage B energy, force, strength

power C to adapt, to fix, to harmonise

real D speed, rate, tempo

velocity E payment, reward, salary

Egy pénzösszeg növekedésének nominális értékéből ha levonjuk az inflációt, akkor a növekedés reálértékét kapjuk meg.

Sokszor nehéz kompromisszumot találni a hosszú- és rövidtávú célok között.

Ha rendkívül gyorsan nő az infláció, akkor hiperinflációról beszélünk.

Egy országban a központi bank szabályozza az irányadó kamatlábat.

A pénzforgalom nagy sebessége inflációt gerjeszt. Ez összefügg a bérek emelkedésével is.

VII. Translate the following text

A termékek és szolgáltatások ára elkerülhetetlenül nő. Ezt hívják inflációnak. Oka, hogy a pénz mint elszámolási egység és csereeszköz nem stabil, és értékét számos tényező befolyásolja. Sem a túl magas, sem a túl alacsony infláció nem kedvez a gazdaságnak. Az előbbi elszabadult, hiperinflációhoz vezethet, az utóbbi pedig likviditási csapdához. Ha a forgalomban lévő pénz mennyisége meghaladja az általa vásárolható áruk és szolgáltatások értékét, akkor infláció keletkezik, azaz a pénz vásárlóereje csökken. A legkedvezőbb az alacsony, de nem tartós infláció. A munkanélküliség is hat az inflációra, mégpedig a legtöbb elmélet szerint fordított arányosság áll fenn a kettő között, amit az úgynevezett Philips-görbével lehet szemléltetni. Különösen veszélyes a stagfláció, amikor magas munkanélküliséget magas infláció kísér.

GRAMMAR POINT

The Present Perfect Tense

Compare the two sentences:

In 2007, average wages rose by 4.5%, while the rate of inflation was 4.2%.

♦ Az átlagbérek 2007-ben 4,5%-kal emelkedtek, miközben az inflációs ráta 4,2% volt.

Look! Have you noticed that the price of a pack of cigarettes has risen by 80 forints?

♦ Nézd csak! Észrevetted, hogy egy doboz cigaretta 80 Ft-tal emelkedett meg?

Simple Past Present Perfect

Form: V2 / DID + V1 (in question and negation)

Form: HAVE/HAS + V3

Past events Recent eventsAt a given time (in 2007) No given time, time not importantNo connection with the present Connection with the present, ongoing eventsClosed period of time Action not finished

Other examples:

The United States has never experienced extreme inflation. In the past five years, the price of bread has gone up by 26%. Historically, there has been an inverse relationship between unemployment and

inflation. The inflation rate has been kept low by the central bank. Hyperinflation has affected the economy in dramatic ways. Japan has been experiencing deflation for three years now.

VIDEO – Hyperinflation: The Uncontrollable Skyrocket (19 June 2013) (2:17 min)

(Source: http://www.youtube.com/watch?v=GAi56aOTrIc)

REVISION

1. What is inflation? What is deflation? What is hyperinflation? What is stagflation?

2. What causes inflation? List at least 3 reasons.

3. What is the liquidity trap?

4. What is the relationship between unemployment and inflation?

5. Is inflation always bad for the economy?

V. Taxation (1): Consumption Taxes

Make sure you know these words before reading the text

tax, revenue, efficiency, corporate tax, property tax, excise tax, tax equity, fiscal policy, to subtract, exemptions, deductions

The Decision to Tax

The primary purpose of taxation is to raise revenue for the government, rather than influence behaviour.

Key Points

In studying the effectiveness of taxes, economists focus on the efficiency of taxes, and the equity of taxation, which looks at who pays the taxes.

Most countries have many taxes including those on income, payroll, corporate, and property taxes.

Debates about the income tax today focus on three issues: the appropriate overall level of taxation; how "progressive," the tax should be; and the extent to which taxation should be used to promote social objectives.

Taxation plays a large role in the economy, and different taxes have different effects on taxpayers. For the most part, the purpose of taxation is to raise revenue rather than to influence behaviour. Economists tend to focus on two aspects of taxation: the efficiency of a given tax; and tax equity, regarding which members of a society pay the tax.

There are many different types of taxation in most countries, such as taxes on: income, capital gains, interest, dividends, property, estates, and corporate profit. In the USA, the Internal Revenue Service (IRS) is responsible for the collection of taxes. In the United Kingdom, Her Majesty’s Revenue and Customs (HMRC) does the same.

Most debates about the income tax today revolve around three issues: the appropriate overall level of taxation; how graduated, or "progressive," the tax should be; and the extent to which taxation should be used to promote social objectives. Over the years, lawmakers have introduced various exemptions and deductions from the income tax to encourage specific kinds of economic activity. Most notably, taxpayers are allowed to subtract from their taxable income any interest they must pay on loans used to buy homes. Similarly, the government allows lower- and middle-income taxpayers to shelter certain amounts of money from taxation that they save in special Individual Retirement Accounts (IRAs) to meet their retirement expenses and to pay for their children's college education.

(Source: https://www.boundless.com/economics/taxation-and-the-tax-system/loss-of-economic-efficiency-due-to-taxation/the-decision-to-tax/)

Types of Taxes (1): Consumption Taxes

A tax is a fee charged ("levied") by a government on a product, income, or activity.

Key Points

Taxes are often added to goods sold. How the payment of the tax is split between the buyer and seller is called the tax incidence.

Ad valorem literally means "in proportion to the value." An ad valorem tax (or VAT, value added tax) is charged based on the value of the good being sold.

An excise tax is a tax on each item sold and thus is based on volume rather than the price of the good.

A tax is a fee charged ("levied") by a government on a product, income, or activity. One of the most important uses of taxes is to finance public goods and services. Since public goods and services do not allow a non-payer to be excluded, or allow exclusion by a consumer, there cannot be a market in the good or service. Public goods include fresh air, knowledge, national defence, flood control systems, and street lights. Therefore, they need to be provided by governments that tend to finance themselves largely through taxes. Two important categories of taxes are ad valorem taxes and excise taxes.

Ad valorem literally means "in proportion to the value." An ad valorem tax is charged based on the value of the good being sold. As the price of a good rises, the amount of the tax rises at a proportionate rate. Perhaps the most common example of an ad valorem tax is the sales tax. Many states charge a certain percentage on all sales. For example, if a state has a 6% sales tax and a consumer purchases $100 worth of goods from a store, the consumer will be charged $106 total. If the consumer purchases $200 worth of goods, the total bill would be $212 because an ad valorem tax is based on the value of goods purchased. It increases when a consumer increases the amount of merchandise that is purchased.

An excise tax is a tax on each item sold and thus is based on volume rather than the price of the good. Excise taxes are paid to the government by the suppliers of goods. The suppliers typically build this tax into the price of a good and charge an equivalent amount to the purchaser of the good, which effectively passes the tax along to the consumer. A common example of an excise tax is the tax charged on alcoholic beverages. Liquor, beer, and wine are all taxed based on the number of units purchased. In Indiana, for example, wine is taxed at the rate of $0.47 per gallon.

Though the producer adds a tax to the price of the good increasing the price the consumer pays, the consumer does not necessarily pay the full tax. It is important to understand that a tax is usually paid by both the producer and the consumer of a good. This is called tax incidence. Tax incidence is the manner in which the burden of a tax is shared among participants in a market.

(Source: https://www.boundless.com/economics/taxation-and-the-tax-system/taxation/types-of-taxes/)

THINK ABOUT IT

1. Which is better? “Progressive” taxation or “flat” taxation? In progressive taxation systems, the more someone earns, the more he or she pays. In the flat taxation system, everyone pays the same amount of taxes (e.g., 20% of the income).

2. What about property tax? Should, for example, owning a house be taxed?

3. What about luxury tax?

4. Should single people or families without children pay an extra tax?

5. Do you agree with the system of exemptions and deductions? For instance, tax allowance for two or more children?

6. Is it fair if the government wants to raise its revenues by raising VAT? What should be taxed more? Income (labour) or consumption?

LANGUAGE EXERCISE

I. True or false?

1. Tax equity means that every member of the society pays an equal amount of tax.

2. Taxpayers (in the USA) can reduce their income tax by the interest they pay after loans on their homes.

3. In the case of ad valorem tax (VAT) you pay after the number of items you buy.

4. In the case of excise tax, you pay after the number of items you buy.

5. In the case of tax incidence, the producer and the buyer pay the consumption tax together.

II. Match the words and the definitions

1. efficiency, 2. interest, 3. property, 4. tax, 5. deduction, 5. exemption, 6. retirement, 7. burden

a., A piece of real estate, such as a parcel of land.

b., Money paid to the government other than for transaction-specific goods and services.

c., Something that is carried; a responsibility, or duty.

d., The act of freeing someone from his or her obligations to which others are subject.

e., The act of subtraction.

f., The extent to which a resource, such as electricity, is used for the intended purpose; the ratio of useful work to energy expended.

g., The price paid for obtaining, or price received for providing, money or goods in a credit transaction, calculated as a fraction of the amount or value of what was borrowed.

h., Withdrawal from one's occupation, business, or office.

III. Fill in the gaps with the above words

1. …………………………………… rates have been cut by 0.25% by the central bank.

2. Citizens can lower their taxes by certain ……………………………….. and ……………………………………

3. Land or house are called immovable ……………………………………

4. Old people no longer working receive a ………………………………….. benefit.

5. The ……………………………………….. of the company has decreased: it can only produce 450 cars a day instead of last year’s 500 cars.

6. The government levies ……………………………. in order to cover its expenses.

7. Theoretically, everyone has to contribute to the ……………………………….. of financing a country.

IV. Supply the necessary word forms. The Hungarian equivalents are given

NOUN VERB ADJECTIVE

interest* (érdekel) (érdekes)

(mentesítés) to exempt (mentes)

deduction (levon) (levonható)

influence (befolyásol) (befolyásos)

(haladás) (halad) progressive

(kizárás) to excluded (kizárt)

(elősegítés/előléptetés) to promote (támogatott)

* interest = kamat / érdekeltség

V. Match the synonyms. Choose from the list below.

aim, balanced, burden, to buy, to charge, end, equal, drink, duty, fair, to impose, to get, goal, even, levy, liquor, to place, tax, to put on, purpose, to obtain, tariff, toll, to shop,

beverage:

proportionate:

to purchase:

objective (n.):

to levy:

VI. Translate the following text

Az állam bevételei elsősorban az állampolgárok adóiból számolnak. Nagy vonalakban kétféle adót különböztetünk meg: fogyasztási és jövedelem típusú adókat. Számos probléma merül fel az adórendszerekkel kapcsolatban, például, hogy mennyire igazságosak, a társadalom mely rétegeire milyen hatással vannak, mennyire progresszívek, és hogy mennyire segítik elő a társadalmi célok megvalósulását. Beszélhetünk általános forgalmi adóról, termékadóról, jövedelemadóról, vagyonadóról és társasági adóról. A forgalmi adó esetében az adó egyenesen arányos a termék árával. A termékadó esetében pedig az árucikk mennyiségével arányos (tehát minden egység után egy meghatározott összeget kell fizetnie a fogyasztónak). Elvben a gyártó fizeti meg a termékadót, de a gyakorlatban a gyártó azt vagy annak egy részét beépíti a termék árába, és így áthárítja a vevőre.

GRAMMAR POINT

1. The more… the more (minél… annál)

Progressive taxation means simply: “The more you earn, the more you should pay.”

The + középfok // the + középfok

Minél többet keres valaki, annál többet fizessen.

The more goods there are on the market, the lower the price of those goods are going to be.

The more the government levies taxes on the citizens, the less they are willing to pay them.

The sooner, the better.

II. Prepositions (vonzatok)

… which looks AT who pays the taxes.

… which has an effect ON taxpayers.

The Internal Revenue Service (IRS) is responsible FOR the collection of taxes.

…to pay FOR their children’s college education.

… is based ON the value of the good being sold.

HOMEWORK

Collect all the expressions with prepositions from this text and the previous ones as well.

VIDEO – How Does VAT Work? (22 February 2013) (1:46 min)

(Source: http://www.youtube.com/watch?v=fmAbBu7VQjQ)

REVISION

1. Why does the state levy taxes?

2. What are the dilemmas surrounding the tax system?

3. What is the difference between progressive and flat taxation?

4. What are the two main types of taxes?

5. What is the difference between VAT and excise tax?

6. How can someone reduce the taxes he or she pays?

VI. Taxation (2): Individual Taxes

Make sure you know these words before reading the text

retail, lease, to rent, poll tax, engage in, refrain from, taxable income, gross income, retirement plan, health saving plan, pay-as-you-earn (PAYE), tax refund, fair market value, estimated, tax evasion, tax haven

Key Points

A direct tax is one imposed upon an individual person or on property, as opposed to an indirect tax that is imposed upon a transaction.

Income tax is levied on the total income of the individual, less deductions and credits. Sales tax is levied on the state level on retail sale, lease, and rental of many goods, as

well as some services. Property tax is levied on interests in real property (land, buildings, and permanent

improvements). Estate tax is an excise tax levied on the right to pass property at death.

Individual Taxes

These taxes may be imposed on the same income, property, or activity, often without offset of one tax against another. Taxes may be based on property, income, transactions, importation of goods, business activity, or a variety of factors, and are generally imposed on the type of taxpayer for whom such tax base is relevant.

Direct Versus Indirect Taxes

Individual taxes can generally be defined as either direct or indirect. A direct tax is one imposed upon an individual person or on property, as opposed to a tax imposed upon a transaction. In U.S. constitutional law, direct taxes refer to poll taxes and property taxes, which are based on simple existence or ownership. Indirect taxes, such as sales or value-added tax, are imposed only when a taxable transaction occurs. People have the freedom to engage in or refrain from such transactions, whereas a direct tax is typically imposed upon an individual in an unconditional manner.

Individual Tax Categories

Income Tax

Personal income tax is generally the largest source of tax revenue in most countries. Taxes based on income are imposed at the state level and sometimes local levels. Income tax is levied on the total income of the individual, less deductions, reducing an individual's taxable income. The tax system allows for personal exemptions, as well as certain "itemized deductions." For example, in the US, these include:

Medical expenses (over 7.5% of adjusted gross income)

State and local income and property taxes Interest expense on certain home loans Gifts of money or property to qualifying charitable organizations, subject to certain

maximum limitations Losses on non-income-producing property due to casualty/theft Contribution to certain retirement or health savings plans Certain educational expenses

Income tax is often collected on a pay-as-you-earn basis (i.e., withholding taxes from wages). Small corrections are usually made after the end of the tax year. These corrections take one of two forms: payments to the government by taxpayers who have not paid enough during the tax year; and government tax refunds for those who have overpaid.

Payroll Tax

Payroll taxes are imposed on employers and employees and on various compensation bases. These include income tax withholding, social security and medicare taxes, and unemployment taxes.

Sales Tax

Sales tax is an indirect tax levied on the state level, including taxes on retail sale, lease and rental of goods, as well as some services. Many cities, counties, transit authorities, and special purpose districts impose an additional local sales tax. Sales tax is calculated as the purchase price times the appropriate tax rate. Tax rates vary widely by jurisdiction from less than 1% to over 10%. Nearly all jurisdictions provide numerous categories of goods and services that are exempt from sales tax or taxed at a reduced rate.

In addition to sales tax, excise taxes are imposed at the federal and state levels on a goods, including alcohol, tobacco, tires, gasoline, diesel fuel, coal, firearms, telephone service, air transportation, unregistered bonds, etc.

Property Tax

Most jurisdictions below the state level impose a tax on interests in real property (land, buildings, and permanent improvements). Property tax is based on the fair market value of the property. A fair market value is the estimated value of the property. The amount of tax is determined annually based on the market value of each property on a particular date.

Estate Tax

The estate tax is an excise tax levied on the right to pass property at death. It is imposed on the estate, not the beneficiary. The taxable values of estates are the fair market value.

(Source: https://www.boundless.com/finance/financial-statements-taxes-and-cash-flow/tax-considerations/individual-taxes/)

THINK ABOUT IT

1. What do you think should get more emphasis in taxation? Indirect or direct taxes?

2. Is the present system of flat taxation (16%) in Hungary, in your opinion, fair?

3. Should properties be taxed? (Land, house, other immovable properties?)

4. Is it fair to levy interest tax after fixed rate bonds?

LANGUAGE EXERCISE

I. True or false?

1. A direct tax is imposed on what you “have” rather than what you “do.”

2. Everyone has to pay an estate tax if he or she has a house or land.

3. Net income is gross income minus taxes and deductions.

4. Certain items may reduce the income tax.

5. The fair market value is the price at which a property is sold.

6. “Pay-as-you-earn” means you only get the net sum of your salary.

II. Match the words and the definitions

1. cumulative, 2. fair market value, 3. market value, 4. liable, 5. unconditional, 6. medical, 7. jurisdiction

a., An estimate of the market value of a property.

b., Under obligation, debt or responsibility owed to someone.

c., Increasing or enlarging by successive addition.

d., Relating to the study or practice of medicine.

e., The territorial range of authority or control.

f., The total value of a company, merchandise, product, etc. as traded in the market.

g., Without condition or limitation; absolute.

III. Fill in the gaps with the above words

1. From the age of 18 to 35, he was ………………….…… to military service: he had to spend two years in the army.

2. Outside this ………………………………………….., other rules apply for property taxation.

3. Prevention is always better than ………………………………… treatment.

4. The enemy was completely defeated and therefore was forced to accept ……………………………………. surrender.

5. A punishment that is imposed with greater severity upon a repeat offender is called a …………………………………….. punishment.

6. These kinds of houses had been sold for $130,000 in the area, so the ……………………………………………. of our home was also estimated to be the same sum of money, but actually we managed to sell the house for $150,000, so the …………………………………….. was higher.

IV. Supply the necessary word forms. The Hungarian equivalents are given

NOUN VERB ADJECTIVE

(kötelezettség) to engage (in) ([el]foglalt)

(nyugdíjba vonulás) to retire nyugdíjas

ownership (tulajdonol) (saját*)

(alany) (alávet) subjected

compensation (ellensúlyoz, kárpótol) (ellensúlyozott, kárpótolt)

(megállapítás) to determine (megállapított)

V. Match the synonyms. Choose from the list below.

construction, cut down, estate, hand, downsized, explicit, home, house, land, lessened, edifice, premises, open, staff member, ownership, straight, worker

building:

direct:

property:

reduced:

employee:

VI. Group the expressions according to tax types

build in the price, beneficiary, buildings, correction, death, employer & employee, net salary, fair market value, item, itemized deductions, land, lease, medicare expenses, proportionate, real estate, retail, social security, rental, taxable income, tax incidence, tax refund, to pass on property, value, VAT

Ad valorem tax

Excise tax Income tax Payroll tax Sales tax Property tax

Estate tax

VII. Translate the following text

Az adók másik nagy csoportja az egyéni adók (szemben a fogyasztási adókkal). Az egyéni adókat jövedelemre, tulajdonra vagy tevékenységre vetik ki. A közvetlen adók egyéni szinten, illetve tulajdonra kerülnek kivetésre, a közvetett adók pedig tranzakciókra. Az egyéni adókon belül beszélhetünk jövedelemadóról, járulékokról, illetékről, ingatlanadóról és öröklési adóról. A jövedelemadót és a járulékokat a bruttó bérből vonják le. A jövedelemadó-alap bizonyos tételekkel csökkenthető. Az adóév végén bizonyos korrekciókra kerül sor: vagy az adózó fizet az adóhatóságnak, vagy adóvisszatérítést kap.

GRAMMAR POINT

The Passive Voice (2)

Supply the missing verbs in the following sentences. Sometimes several solutions are possible. (Try not to copy from the text.)

It is important to understand that a tax is usually ……………………………………………

by both the producer and the consumer of a good.

Public goods must be …………………………………………………… by the government.

How the payment of the tax is ………………………………. between the buyer and seller is

called the tax incidence.

A direct tax is one that is ……………………………….. upon an individual person or on

property.

Taxes may be ……………………………………………… on property, income or

transactions.

Income tax is often …………………………………………. on a pay-as-you-earn basis (i.e.,

withholding taxes from wages).

Sales tax is ……………………………………………………. as the purchase price times the

appropriate tax rate.

The amount of tax is …………………………………………………… annually based on the

market value of each property on a particular date.

VIDEO – Tax Evasion – Tax Havens – The Great Scam (21 Nov 2012) (3:45 min)

(Source: http://www.youtube.com/watch?v=wxW8GP59Sq8)

REVISION

1. What is the difference between direct and indirect taxes?

2. What types of individual taxes can you mention?

3. What is deduced from the gross salary?

4. What is itemized deduction and tax refund?

5. What is the difference between income tax and payroll tax?

6. What is the difference between property tax and estate tax?